Teva picks new chief executive
Schultz to address restructuring, debt
JERUSALEM/COPENHAGEN: Teva Pharmaceutical Industries Ltd yesterday named H. Lundbeck A/S’s Kaare Schultz as its new chief executive officer, handing the drugs industry veteran the urgent task of convincing investors of the struggling Israeli firm’s future.
A costly acquisition spree in recent years has saddled Teva with huge debts and eroded shareholder confidence in the world’s largest generics drugmaker, whose stock has dropped by 50% since early August when it cut both its forecasts and its dividend.
The first task for Schultz, named CEO after a seven-month search, will be to decide whether to maintain Teva as both a generics and specialty drugmaker, split it in two or get out of low-margin, high competition generics altogether.
Schultz said he would develop a joint strategy with the board and management that would address the “various restructuring initiatives” as well as Teva’s more than $35 billion in debt.
Teva is selling off non-core businesses such as its women’s health business and European oncology and pain unit to cut its debts.
“There will be a very clear strategy that will be communicated once we’re ready to do that,” Schultz told Reuters.
Teva’s shareholders welcomed the 56-year-old’s appointment, with its Tel Aviv-listed shares rising by 13%.
But shares in Denmark’s Lundbeck fell by over 12% as investors digested the departure of both Schultz and Staffan Schueberg, its chief commercial officer, who has also quit.
Teva, which cooperates with Lundbeck on a number of drugs, said no start date has been set for Schultz, adding that he would join the company and relocate to Israel as soon as practicable.
The Tel Aviv-based company is facing accelerating price erosion in the United States and working out how to reduce the debts it took on to finance the $40.5 billion purchase of Allergan Plc’s generics business last year.
Analysts and investors said Teva paid too much for Actavis Generics and that led to the departure in February of CEO Erez Vigodman.
“We need to restore credibility,” Teva chairman Sol Barer told Reuters. “It’s early but ... he (Schultz) will dive in and come up rapidly with a strategic plan.”
He also said that Teva had “no plans now” to split in two.
Barer and Teva’s board have been criticised for taking so long to hire a new CEO.
“We wanted to make sure we got it right,” Barer said, noting that Schultz hit all of the board’s criteria, including global and pharmaceutical experience.
“Critically, he has successful turnaround experience. At Lundbeck, it was a troubled company and he turned it around and created significant value for shareholders. And, he has significant credibility with stakeholders,” Barer said.
Schultz will succeed Yitzhak Peterburg, who will continue as Teva’s interim CEO until Schultz takes over.
Schultz had been widely seen as heir apparent at the world’s largest diabetes drugmaker Novo Nordisk A/S but quit in 2015 when Novo’s former CEO said he would stay until 2019.
He became CEO of Lundbeck in May 2015 shortly and the Danish firm’s share price has more than tripled since he took over and returned it to profit by slimming costs.
At Teva, Schultz will also face significant challenges.
The company has put Reykjavik, Iceland-based Medis, a supplier of development work to third-party drugmakers, up for sale and is looking to team up with other drugmakers to fund some of its development pipeline.
“We are looking for partners ... a series of partners. It’s not to fund the whole pipeline, just some projects in it. A small part of it,” Teva spokeswoman Denise Bradley told Reuters in August.
Teva’s problems also stem in large part from its specialty business. Its blockbuster multiple sclerosis drug Copaxone had contributed much of its revenue and profit, but its patent has run out and now is facing generic competition.